Pension Consultant flashcards
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31 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Ratio percentage test
- Coverage test dividing the percentage of non-highly compensated employees benefiting by the percentage of highly compensated employees benefiting; result must be at least 70 percent.
- ADP test
- Actual deferral percentage test comparing highly compensated employee average deferral rates to non-highly compensated averages, limited to 125 percent or plus 2 points.
- Top-heavy plan
- Plan where key employee account balances exceed 60 percent of total plan assets, triggering minimum contributions for non-key employees.
- 415(c) annual additions
- Limit on total annual additions to a defined contribution plan, equal to the lesser of the indexed dollar limit or 100 percent of compensation.
- Safe harbor 401(k)
- Plan design using a 3 percent nonelective or basic matching contribution to avoid ADP and ACP testing, with required notice and immediate vesting.
- 401(a)(17) compensation limit
- Indexed annual cap on compensation that may be used for benefit calculations, contributions, and nondiscrimination testing.
- Controlled group
- Two or more businesses under common ownership or control, treated as a single employer for coverage, nondiscrimination, and 415 purposes.
- 402(g) deferral limit
- Indexed annual cap on elective deferrals per individual, aggregated across all plans in which the individual participates.
- Funding target
- Present value of all accrued benefits under the plan, calculated using segment rates and actuarial assumptions prescribed for minimum funding.
- Target normal cost
- Present value of benefits expected to accrue during the plan year, a component of the minimum required contribution.
- AFTAP
- Adjusted funding target attainment percentage; ratio of plan assets minus credit balances to the funding target, used to determine benefit restrictions.
- Segment rates
- Three Treasury-published interest rates for 0-5, 5-20, and over-20-year periods used to discount benefits for funding calculations.
- At-risk liability
- Funding target calculated with assumptions reflecting plan termination behavior, applicable when AFTAP falls below 80 percent.
- Shortfall amortization
- Seven-year amortization of the funding shortfall, included in the minimum required contribution calculation.
- 436 benefit restrictions
- Rules limiting lump sums and accrual increases when AFTAP falls below 80 percent, and prohibiting them below 60 percent.
- 417(e) lump sum
- Rules governing present value calculations for lump-sum distributions, using prescribed mortality and interest assumptions.
- PBGC variable-rate premium
- Premium based on unfunded vested benefits calculated under PBGC assumptions, capped and indexed annually.
- ERISA prudence duty
- Fiduciary obligation to act with the care, skill, and diligence of a prudent expert familiar with similar matters.
- 408(b)(2) disclosure
- Requirement that covered service providers disclose compensation, fiduciary status, and conflicts to plan fiduciaries.
- 404a-5 disclosure
- Participant fee disclosure rule requiring annual and quarterly notices of plan and investment expenses.
- Form 5500 deadline
- Annual report due the last day of the seventh month after plan year end, extendable 2.5 months via Form 5558.
- 204(h) notice
- Advance notice of at least 45 days before a significant reduction in future benefit accruals, or 15 days for small plans.
- Prohibited transaction
- Party-in-interest dealing, self-dealing, or kickback barred by ERISA section 406, subject to statutory or individual exemptions.
- EPCRS
- IRS correction program with self-correction, Voluntary Correction Program submission, and Audit CAP for examination findings.
- Summary Annual Report
- Participant summary of Form 5500 data, furnished within 9 months after plan year end or 2 months after extended filing date.
- DB vs DC risk
- Defined benefit plans place investment and longevity risk on the sponsor; defined contribution plans shift both risks to participants.
- Plan governance calendar
- Annual valuation, AFTAP certification, quarterly contribution monitoring, funding method review, and periodic fee benchmarking activities.
- Fee benchmarking metrics
- Measures including per-participant recordkeeping cost, basis points on assets, actuarial fees, and total cost as percentage of assets.
- Vendor RFP process
- Defining scope, issuing requests for proposal, scoring cost and service, checking enforcement history, and negotiating termination terms.
- Plan merger requirements
- Mergers and spinoffs must preserve protected benefits under anti-cutback rules and may require 204(h) notice for accrual reductions.
- Settlor vs fiduciary
- Plan design and benefit formula decisions are settler acts, not fiduciary acts; administration and investment decisions generally are fiduciary.